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18 May, 07:01

Suppose the marginal product of labor is MPN = 200 - 0.5N where N is aggregate employment. The aggregate quantity of labor supplied is 300 + 8w, where w is the real wage. What is the equilibrium quantity of employment?

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Answers (2)
  1. 18 May, 07:17
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    Equillibrum quantity of employment = 380

    Explanation:

    At equillibrum real wage (w) is equal to marginal product of labour (MPN)

    MPN = 200-0.5N

    Aggregate supply = 300+8w

    At equilibrium w = MPN

    At equillibrum Aggregate demand (N) = Aggregate Supply

    w = 200-0.5N

    w = 200-0.5 (300+8w)

    w = 200-150-4w

    4w+w = 50

    5w = 50

    w = 10

    Substitute value of w in w = 200-0.5N

    10 = 200-0.5N

    0.5N = 200-10

    0.5N = 190

    N = 190/0.5 = 380
  2. 18 May, 07:54
    0
    10

    Explanation:

    The margin product of labor (MPN) = 200 - 0.5N

    Aggregate quantity of labor supplied, N = 300 + 8w

    Note: In labor market equilibrium, marginal product of labor is equivalent to real wage (w),

    Thus real wage (w) can be calculated as:

    w = 200 - 0.5N

    w = 200 - 0.5 (300+8w)

    w = 200 - 150-4w

    Collecting of like terms:

    w + 4w = 200 - 150

    5w = 50

    w = 50/5

    w = 10

    Thus, the required equilibrium real wage (w) in the market = 10
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